Mortgage Payment Breakdown

What’s in a mortgage payment?

There are four parts of a mortgage payment: Principal, Interest, Taxes, and Insurance — or PITI for short. Here’s a quick breakdown of what the four parts are.

Principal 

The total amount borrowed. This part of the payment reduces the remaining balance of a mortgage.  

Interest 

The fee that’s added on for borrowing money. Interest will stay the same with a fixed-rate mortgage and will increase or decrease with an adjustable-rate mortgage. 

Taxes 

The property taxes determined by the local government. Taxes are added to the payment if the lender is managing the escrow account. 

Insurance 

The homeowner's insurance amount that's determined by the policy selected. This part of the payment is for property insurance that covers any losses or damages to a home.  

Other costs to consider

When you’re planning your budget, there are a few potential homeowner costs to consider. Here are some things to plan for in addition to your mortgage payment.

  • Utilities

Think electricity, gas, trash removal, water and sewage. Don't forget the choice of utilities like internet and cable as well.

  • Association fees

Sometimes homeowners are required to join a homeowner's association and follow the community's regulations by paying monthly or annual upkeep fees.

  • Yard maintenance

To obey city code and homeowner's association regulations, you'll either need to pay for yard maintenance services or yard equipment to do the job yourself.

  • Upgrades

To keep your home up to date, you'll likely need to upgrade over the years. Consider the cost of fresh paint and remodeled rooms before and after you move in.

  • Commuting

Depending on traffic and the distance between your home and work, the cost of gas can add up. Calculate your monthly cost to know what to expect.

  • Pest control

To keep bugs out of your home, you'll need regular pest control. Frequency depends on the situation, but often bi-monthly treatment is recommended.

  • Furniture and décor

If you're upsizing or moving into your first home you'll have a lot of empty space to fill. Make a furniture and décor shopping list, then calculate the cost. Just be sure not to make any big purchases that might impact your credit score before the mortgage is finalized.

  • The unexpected

No matter how well you plan, there will always be unexpected homeowner costs. In case of damages or additional fees, keep a growing emergency fund.

What can you afford?

Use payment calculator to see how each of these might affect your payment.

Try the mortgage payment calculator »

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